Taxes Consolidation Act 1997 section 111AM

Constituent entities joining and leaving MNE group or large-scale domestic group

Section 111AM sets out the rules for determining how a "target entity" is treated when it joins or leaves a multinational enterprise (MNE) group or a large-scale domestic group during a fiscal year (the "acquisition year"), including how its income, expenses, taxes, and deferred tax attributes are allocated between groups.

• A target entity that joins or leaves a group mid-year is treated as a member for that fiscal year provided its financial activities are included line-by-line in the group's consolidated financial statements.
• During the acquisition year, only the target entity's income, taxes, payroll costs, and tangible assets reflected in the consolidated financial statements are taken into account, with tangible assets prorated for the period of group membership.
• Deferred tax assets and liabilities transfer with the target entity and are treated by the acquiring group as if it had always held a controlling interest, except for qualifying loss deferred tax assets.
• Where a jurisdiction treats the acquisition or disposal of a controlling interest as an asset and liability transaction for tax purposes, the rules of this Part follow that same treatment.

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